Advertising

The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds | seattletimes.com

The Seattle Times

Business / Technology


Our network sites seattletimes.com | Advanced

Originally published Thursday, April 24, 2008 at 12:00 AM

E-mail article     Print view

Starbucks warns its earnings for quarter, year will be lower; stock price hit

Starbucks expects earnings to drop to 15 cents a share in the fiscal second quarter, down from 19 cents a year ago, the company said Wednesday...

Seattle Times business reporter

Starbucks expects earnings to drop to 15 cents a share in the fiscal second quarter, down from 19 cents a year ago, the company said Wednesday.

It also warned that full-year earnings per share will be "somewhat lower" than last year's 87 cents a share, blaming a "sharp weakening in the U.S. consumer environment."

Shares plunged nearly $2 in after-hours trading after a 15-cent gain to $17.85 during regular trading. The news came after the close of regular trading.

The Seattle coffee retailer expects revenue to rise 12 percent for the quarter, it reported in an unusual release of preliminary results. Its second quarter ended March 30 and actual results are scheduled for release April 30.

About 3 cents of the second-quarter drop in earnings per share comes from the cost of changes Starbucks has made since Howard Schultz reclaimed the chief executive post in January, including charges related to closing some underperforming stores.

The softness in revenues is due largely to a mid-single-digit decline in U.S. comparable store sales, driven by decreased traffic, the company said.

California and Florida account for 32 percent of Starbucks' U.S. retail revenues and 31 percent of its U.S. company-operated retail stores, and Starbucks pointed out in the release that those states have been particularly hard hit by a rough housing market. Starbucks did not give its revenue information for those states.

The economy is having "a substantial impact on our performance," Schultz said. Starbucks is in the early stages of executing a series of new initiatives, "and the benefits are therefore not yet reflected in our financial results."

Customer research shows that "while our customers are reducing the frequency of their visits to our stores — due to the economic pressures they are feeling — they are not substituting their Starbucks experience with coffee products from others," Schultz said.

Starbucks, which cut about 600 positions in February, is looking for more ways to reduce costs, he said.

The situation is far different from late 2002, when other retailers struggled through one of the slowest holiday seasons in years while Starbucks had its strongest holiday sales yet. Same-store sales rose 9 percent that quarter, in contrast to a 1 percent gain in the first quarter this year.

"These results demonstrate that despite what has been an extended period of economic uncertainty, we can deliver shareholder value," said then-CEO Orin Smith.

Rising sales suggested that specialty coffee was an "affordable luxury" consumers did not want to give up even in hard economic times, he said at the time.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

Copyright © 2008 The Seattle Times Company

More Business & Technology headlines...

E-mail article Print view      Share:    Digg     Newsvine

advertising

Brier Dudley: Handbook for Droid users

UPDATE - 12:40 AM
House health bill unacceptable to many in Senate

NEW - 10:33 PM
Plans call for Triangle to become West Seattle gateway

Hooking e-reading fans

Chip companies may face a drawn-out recovery

Advertising

Video

Mourners gather at KeyArena for slain officer's memorial
Mourners gathered at KeyArena for the memorial service of Seattle police Officer Timothy Brenton on November 6, 2009.

Procession for slain SPD officer
Election Night: Approve R-71
Election Night: Reject R-71
Election Night: Joe Mallahan
Election Night: Mike McGinn
Election Night: Susan Hutchison
Election Night: Dow Constatine
Candlelight vigil for Officer Brenton
Flying Elephant on Aurora

Marketplace

nwautos

2009's most fuel-efficient sedansnew
Choosing a new sedan? Weigh the impact of your choice on your wallet and on the planet.
Post a comment

Open Houses

Find this weekend's open house listings.
Or search by location:

 
Most read
Most commented
Most e-mailed
 
 
Advertising